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Usefulness of Pretests for Estimating Underlying Technologies Using Dual Profit Functions

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  • Dixon, Bruce L
  • Garcia, Philip
  • Anderson, Margot

Abstract

Translog and generalized-linear approximating forms are used to estimate dual profit functions from stochastically simulated data generated from a known, relatively complex technology under profit-maximizing conditions. The hypotheses of monotonicity, convexity, and equality of parameters common to the profit function and demand equations are tested. This last hypothesis is always rejected and monotonicity is never rejected. Convexity is rejected for about a third of the translog models and fewer than 5 percent of generalized-linear models. Neither approximating form strongly dominates the other for accuracy in estimating the underlying elasticities of substitution. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Dixon, Bruce L & Garcia, Philip & Anderson, Margot, 1987. "Usefulness of Pretests for Estimating Underlying Technologies Using Dual Profit Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 623-633, October.
    • Handle: RePEc:ier:iecrev:v:28:y:1987:i:3:p:623-33
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    Cited by:

    1. Simon Feeny, 2000. "Determinants of Profitability: An Empirical Investigation Using Australian Tax Entities," Melbourne Institute Working Paper Series wp2000n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    2. Petri Rouvinen, 2002. "The existence of R&D spillovers: A cost function estimation with random coefficients," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(6), pages 525-541.
    3. Ashwin Madhou & Imad Moosa & Vikash Ramiah, 2015. "Working Capital as a Determinant of Corporate Profitability," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-17, December.
    4. Simon Feeny & Mark Harris & Mark Rogers, 2005. "A dynamic panel analysis of the profitability of Australian tax entities," Empirical Economics, Springer, vol. 30(1), pages 209-233, January.
    5. Diop, Hamady & Kazmierczak, Richard F., Jr., 1995. "Technology And Management In Mauritanian Cephalopod Fisheries," Staff Papers 31686, Louisiana State University, Department of Agricultural Economics and Agribusiness.
    6. Thompson, Gary D., 1989. "Tariff and Nontariff Barrier Impacts on Illegal Migration: Us Fresh Winter Tomato Market," 1989 Occasional Paper Series No. 5 197682, International Association of Agricultural Economists.
    7. Thompson, Gary D., 1988. "Choice Of Flexible Functional Forms: Review And Appraisal," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-15, December.
    8. Settlage, Daniel M. & Dixon, Bruce L. & Thomsen, Michael R., 2000. "A Comparison Of Various Frontier Estimation Methods Under Differing Data Generation Assumptions," Staff Papers 15773, University of Arkansas, Department of Agricultural Economics and Agribusiness.
    9. J. Christina Wang, 2003. "Productivity and economies of scale in the production of bank service value added," Working Papers 03-7, Federal Reserve Bank of Boston.

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